Assignment Wholesale, What am I assigning?

Question

Hello

In my state of Massachusetts agents use two contracts during the typical RE transaction. First there is the "offer to purchase" which is usually 1 to 2 pages. Second there is the purchase and sale "P&S" agreement which is usually 5 pages long.

The boilerplate offer to purchase agreement outlines who the buyer and seller are, what the offer price is and the earnest money deposits. It describes that x will be held in escrow upon the acceptance of the offer, and another x deposit will be held is escrow upon the signing of the purchase and sale. The offer to purchase also highlights all important dates: closing, appraisal, mortgage commitment, inspection, purchase and sale signing, etc.

My question is regarding wholesale deals where you plan to assigning your contract for a fee, you never take title. All you do is enter into an agreement with a seller and transfer your rights in the contract to one of your cash buyers.

Should I be assigning the offer to purchase or the purchase and sale agreement? Also since I have already put x amount of earnest money into escrow should I add that amount to my assignment fee  so I can get it back?

Thank you

Ricardo Rosales · Answer

@Rich Hupper the key to wholesale is to move that property in 30 days or less, which means that you have to move fairly fast, I never put more than $100 as earnest money, I have actually put $10 to open title many times, you can ask your buyer (The person you will assign to) to deposit the escrow (Whatever you ask them to lock them on the deal anywhere from $1000 to 10K depending on the size of the deal) on the title company or a check payable to you or your company, and then when they close you get your assignment fee. Here is a summary:

1.-Get property on contract and open title immediately.

2.-Start advertising your property to your buyers and ask them for their money to lock up the deal. ( I get mine moved the first 5 days)

3.-Once title is cleared (Usually 7 to 15 days) you can close. If they are using hard money it will take aprox. 20 to 30 days for them to close.

4.-Have funds lined up in case your buyer falls thru, you close on the property and proceed to resale. (do not let this stop you form putting a property on contract if you can't find private money) Hard money lenders also will charge you a % of the transaction for you to put houses on contract. Is called transactional funding.

5.-At closing you receive your assignment.

If you put 1k for every property you put on contract, once you start doing multiple deals you will find yourself without money fairly quick.

I hope this helps? Hit me up if you have any questions.

Rich Hupper · Answer

@Ricardo Rosales and @Wayne Brooks thank you both this helps me understand the process. Wayne in my state an "offer to purchase" is an enforceable contract according to several attorneys I have spoken to, however it is still customary to execute a Purchase and Sale after the due diligence period stated in the offer to purchase, is over.

For example,, please correct me if I am wrong but an assignment wholesale transaction should play out something like this:

1) Wholesaler and seller execute offer to purchase. wholesaler deposits $1000 earnest money into escrow. Offer to purchase states a 30 day due diligence period starting from the day of acceptance which allows wholesaler to show property to equity partners, appraisers, contractors, etc.

2) Wholesaler spends the next 30 days showing the property to their buyer list.

3) Due diligence expires wholesaler and seller execute purchase and sale agreement, wholesaler deposits $1000 second earnest money deposit into escrow.

4) Wholesaler assigns purchase and sale agreement to his buyer with an assignment contract.

5) Buyer orders escrow agent to produce an abstract of title.

6) If title is clear a closing date is arranged. seller conveys title to buyer and wholesaler collects their fee

Does this sound accurate?

Wayne Brooks · Answer

@Rich Hupper I'm not familiar with your "two step" process there, but your "offer to purchase" sounds sort of like a letter of intent--not really binding on either party, with the details to be in the P&S agreement, which Will be binding.  You definitely need the P&S, and if it's customary to do the offer to purchase first,mother you'll need to do Both, just like a normal transaction.  You will need to collect at least as much EM from your buyer, as you gave the seller.

Leslianne Costello · Answer

So, just to clarify (because I am interested in the answer to

@Rich Hupper's question as well):

A wholesaler should complete the Offer to Purchase with "[Wholesaler] or assigns" as the buyer?

And then the wholesaler's name need not be on the P&S at all?

Or is the answer to simply go find a title company an ask them?

Ricardo Rosales · Answer

You never take title if you just assign the contract, Usually when we advertise a deal we ask for non-reundable deposit to lock the deal and then we send the assignment form. I dont mind disclosing our assignment fee, if you are selling at a good price to an investor, they wont worry about it ether. What you need to do is assign the purchase and sale agreement to the new buyer. You can draft the document yourself, all you need is to find an example and copy it. Make sure you find a title company that is wholesaler friendly in your area.

David Bokman · Answer

Yes, as a wholesaler you A make a deal with a "motivated seller" you than put them in a contract with the intent to close if you wish with a clause that allows you to assign the contract. You than B find a buyer and negotiate a price. Whatever the difference is your assignment fee. You are assigning the buyer the rights to your original contract with the seller. You never take title. Your fee is paid off the hud, if your trying not to disclose your fee to the seller than some people do a double close and actually close on the property.